The policy asks below are a work in progress. The working document is available here. Please comment, add or amend (using the 'suggestions' track-changes editing mode) as you see fit. We are also keen to get input separately on the Benefits of community energy which both BEIS and Ofgem have requested and which will help us advocate better for government support. Please add and comment here and supply short case studies to illustrate in the appendix at the bottom. You can also send comments to email@example.com
Please do write to your MP on the back of the asks below, copying in firstname.lastname@example.org. Urge them to put support for community energy in both their party's and their own local manifestos.
Future options for support for Community Energy
Why Community Energy is important
The future of energy is renewable, zero-carbon, flexible, smart and local. Community energy is key to delivering an engaged citizenry who will participate actively in these changes and in how energy is generated and used. The importance of and diverse services provided by community energy have been recognised at the highest levels in government. Claire Perry MP, as Minister of State for Energy and Climate Change said that ‘community energy is a key cornerstone of government’s ambition for transition to a low-carbon, smart energy system.’ Both she and her successor Chris Skidmore declared that ‘the future of energy is local’.
The changing business case
Since the withdrawal of ROCs, tax relief and the remaining minimal government support for renewable generation, the Feed-in Tariff and Export Tariff (to be replaced by the Smart Export Guarantee, which does not offer long term investor certainty) community energy has struggled to make an investment case. Community energy has to compete in a highly commercial field with high risk and low margins and yet is expected to deliver community benefit as well. Unlike other social enterprises it receives no tax relief. Community Shares offer no opportunity for capital gain, cannot be easily liquidated and offer low returns and only one vote per shareholder rather than per share. The field is high-risk even before these factors are taken into account.
Thousands of local community energy volunteers and experts are waiting and wanting to support the government’s urgent energy transition locally. Without support from the government to enable them to act this vital asset will be lost as they find something else to do with their time - perhaps Extinction Rebellion.
Future options for support for Community Energy
For community energy to play the foundational role described by Claire Perry it must be supported, as it used to be, with:
1. an adequate ‘community energy' team within BEIS with:
2. ambitious targets as in Wales and Scotland
3. a cross departmental working group with
4. strong grass-roots community energy participation in policy making, as well as
5. increasing support for knowledge sharing and collaboration, for instance via the Community Energy Hub, Community Energy England and similar bodies.
6. Community Energy must feature in the government’s Climate Emergency plans.
7. Government and Ofgem must end ‘technology neutral’ regulation and positively support low-carbon generation especially when it delivers social co-benefits.
But none of this is of much use without the
8. financial support
that makes it viable for the passionate local volunteers and experts to initiate and carry out community energy projects. Because of the huge diversity of community energy activity, (from ‘draught-busting’ energy switching and advice in individual homes though innovation projects around local supply, flexibility, transport and heat, to generation projects from rooftop solar to large ground-mounted solar and wind) there is no single, silver-bullet solution. A combination of different interventions is needed to support different types of projects across the wide remit that is the ‘energy transition’.
The government should
9. recognise the importance the added social value community energy brings in a policy package of practical support which should include all or some of the following policies:
Specific policy suggestions
1. Reinstatement of Social Investment Tax Relief for community energy.
a. As mentioned above community energy is expected to compete with commercial operators in a high-risk, low-margin field whilst also delivering social benefit and yet, unlike other social enterprises, is not eligible for SITR. Please see our consultation response with various ancillary policy asks and case studies.
b. [This would be particularly useful to derisk investment and exploit the large amount of interest in community energy among impact investors. It is particularly important for large-scale projects needing large capital investment. It will also enable innovative projects that are perceived as risky eg LED lighting.]
2. Urban Community Energy Fund
a. The recently introduced Rural Community Energy Fund exposes the lack of provision for equivalent projects in urban areas where many community energy groups are located and the opportunity for local supply is greatest.
b. [This would be applicable to projects of all sizes but particularly small/medium scale root-top opportunities that wouldn’t otherwise happen.]
3. A Government Community Energy Loan Facility (at zero or below-market interest rates)
a. In the short term to enable community energy groups who have pre-registered projects for the last of the Feed-in Tariff to install before the March 2020 deadline. In the long term this could become a revolving loan facility so need cost the government no more than the initial capital commitment and could even be self sustaining from interest. In the longer term this could be a revolving fund offering bridging loans to enable projects to install within their timetable.
b. [This would help all pre-registered projects especially post-Brexit when the climate for raising investment may be very difficult and for whom commercial loans or bond finance would break the financial model. It could be short term but in recent years since the ending of community energy eligibility for tax relief and the reduction of the FiT community energy has been much more dependent upon loans. A ‘bridging loan’ facility would enable community energy to install in a timely and cost-effective way.]
4. Community Smart Export Guarantee
a. This should contain a floor-price for exported community energy and a dynamic tariff to enable projects to take advantage of higher prices at times of peak demand. There could also be a 5 year or longer guaranteed tariff for new community energy projects.
b. [This would increase investor certainty, especially for larger scale ground-mounted project where most of the energy is exported.]
5. Community Feed-in Tariff
a. A Community FiT would give the long term investor certainty to install in locations that would not otherwise benefit and to deliver community benefit often over 20 years to those communities. Community CfD would supply similar certainty even if only pegged pennies above current wholesale price.
b. [This would be particularly useful for smaller rooftop solar on schools for instance, attracting smaller local investors for whom a small percentage return is important to justify investing.]
6. Community Renewable Heat Incentive (RHI) with a reasonable lifespan
A Community RHI would enable community energy to pioneer innovative and holistic heat projects and trial them in the community.
7. Reinstating Levy Exemption Certificates for community energy.
LECs used to exempt volumes supplied from renewable power and then subsequently sold in retail from paying the Climate Change Levy. So if reinstated for community energy, it would provide a circa £8/MWh benefit vs other forms of renewable generation for CCL-liable businesses (and suppliers of CCL liable businesses).
8. New procurement guidelines for Local Authorities and other public bodies which provide routes for community energy partnerships.
9. Energy Efficiency Funding that delivers for genuinely vulnerable people and is available to community energy projects
a. Energy conservation and efficiency is top of the energy hierarchy and should be funded commensurately from general taxation. Community energy is at the forefront of delivering low-cost, highly effective energy efficiency work with huge benefit to householders, carbon emissions and the economy. The Energy Redress Fund, currently only available charities should be opened up to community energy organisations.
b. Both ECO and the Warm Homes Discount should be reformed to ensure they deliver for the most vulnerable consumers.
c. Create funding for energy efficiency and whole house retrofit that recognises and rewards the role that community energy groups and other intermediaries can play in increasing take up and enhancing the interface with the householder.
10. Incentivise and mandate system operators to engage with community energy in flexibility and capacity [grid management] markets and innovation trials.
11. Ensure that there is a vibrant market for local embedded generation and that charges reflect the value that embedded generation offers to the system
12. Ensure that use of system charges for consumers incentivise the use of electricity generated locally wherever possible
13. A business rate cap for community energy and remove punitive business rates for roof-top solar.
14. Work with sector bodies like Community Energy England to develop a programme of capacity building for community energy groups to prepare the sector for (and remove barriers to) participation within local energy markets, the provision of flexibility services and the development of a smart energy network.
Other proposals for support
1. Remove VAT on Energy Saving Measures (including solar and batteries).
a. The recent VAT rise from 5% to 20% on Energy Saving Measures should be reversed and ultimately reduced to zero. We understand that the increase was a response to a European Court of Justice ruling and a move that had been put off for several years. To favour energy consumption over conservation, charging 5% VAT on coal and 20% VAT on insulation, solar panels and battery storage, flies in the face of both UK and EU energy policy. Government must remonstrate with the European Commission to get this injustice righted and the ECJ decision rescinded.
b. [This would benefit all community energy projects, especially small projects that are not VAT registered. Even for those that are it represents a vastly increased up-front cash-flow problem.)
2. Support onshore wind (the cheapest renewable energy) by:
a. Amending the National Planning Policy Framework so that applications for small-scale onshore wind developments in England of no more than five megawatts are treated in the same way as any other application for renewable and low carbon energy.
b. Allowing onshore wind to lower power prices through the resumption of competitive electricity market auctions for low carbon energy for the cheapest technologies.
c. [This would help level the playing field for onshore wind and make it a technology available to community energy. It would also increase installations of the cheapest form of renewable energy helping the UK meet its decarbonisation and renewable energy targets in a cost-effective way.]
3. Create local energy conservation, efficiency, DSR and flexibilitymarkets that are accessible for new entrants and in particular for community energy groups.
4. Ofgem to have climate change and social benefit in their official mandate.
5. Ensure access and forward looking charging reform are fit for purpose for community energy.
6. Reform to allow community energy groups to become ‘suppliers’.
7. Reform code to enable meter splitting - so local people can buy part of their energy direct from community energy generators, not just via sleeving through licensed suppliers.
8. Incentives via business rate relief for community involvement and ownership in renewable energy.
9. Encourage public and corporate power purchase agreements with community energy generators
10. Encourage local authorities to work with community energy projects including investing
11. Promoting shared ownership in commercial renewable energy developments, building on the work of the previous Shared Ownership Taskforce.
12. Reform planning to enable local renewable energy. Community ownership and community benefit should be a ‘material planning consideration’.